Army ROTC scholarship for room and board

Discussion in 'ROTC' started by sjbd94, Jan 3, 2013.

  1. sjbd94

    sjbd94 Member

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    i am am contracting next semester and was under the impression that my ROTC scholarship was only for tuition. I was just informed I could use it for room and board instead and I just want to clarify that that would include my housing and my meal plan correct? Seeing as I go to a public school room and board is more expensive so I am just curious as to if that is an option. Thanks!
     
  2. Marist College ROTC

    Marist College ROTC Member

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    Room and Board will be a flat rate. It is also taxable income.

    Your ROO should be the best source of information for this issue.
     
  3. clarksonarmy

    clarksonarmy Recruiting Operations Officer at Clarkson Army

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    two things to keep in mind

    There is a cap on how much room and board is paid (I think it's 10K a year).

    If you use your scholarship for room and board it is taxable.

    That being said if the cost of tuition is significantly less than R&B that is the way to go. Make sure you talk to your cadre/HRA to make sure you know your options.
     
  4. clarksonarmy

    clarksonarmy Recruiting Operations Officer at Clarkson Army

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    Great minds think alike
     
  5. sjbd94

    sjbd94 Member

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    my room and board cost about $1000 more than my tuition and is under $10000 for the year. What do you mean you say that it is taxable, is it not payed directly to the school? Do i get a check for the cost and then i pay it to the school and it can get taxed? Is that what flat rate means?
     
  6. Ohio2015Parent

    Ohio2015Parent Member

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    Can't answer all of your questions, but, yes, the money is typically paid to the school - the school will send you(usually online)a form during January to file your taxes. The amounts paid into your student account that are used for room/board will be reported as taxable income if they come from scholarship money. DS received a housing grant last year + had refundable money from his student account, he paid roughly $600.00 in taxes on these amounts.

    Glad to hear you are contracting:smile:
     
  7. EDelahanty

    EDelahanty Member

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    Taxable status of the grant is not a function of how the money flows. It's simply the way tax law is written. Tuition grants are not categorized as taxable income by the IRS. Room and board grants are taxable income. This may be different for the service academies, but that's not relevant to your situation.

    Based on what you've said, it looks like a close call after taxes. But you should discuss it with your parents and their tax accountant, if they use one. It gets complicated. If you take the room and board option and the resulting taxable income gets included in their gross income, the tax rate may be high enough to more than offset the additional grant money. One option would be to file a separate return for yourself, pay the taxes, and have your parents continue to declare you as a dependent on their tax return.
     
  8. Pima

    Pima Parent

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    I would def. talk to the folks because for all you know that 10K can throw in a different tax bracket and now in the end you are not saving 1K on the bill, you might actually be paying more in the long run due to the taxes they had to pay on all of their earnings.

    I.E. a 3% jump doesn't seem a lot overall, but if their adjusted income is even 75K that is 2250 more owed because you took the 10K for R&B and not for tuition. Making it 1250 in the whole for them financially.

    OBTW, I don't know where the tax cut off are off the top of my head, so no correcting me regarding where the line is, I just pulled a number out to to illustrate mathematically how it does matter for some.

    At the very least it is still not truly going to be 10K since it is taxable.

    Off topic, EDelhanty, can they do that because I wonder if that impacts the tax credit/deductions for college regarding his folks? I don't know, I am sure somebody else does. It would just seem to me that our college sends us a yrly statement saying how much we paid, now if he pays it than who gets to claim the college deduction aka credit on taxes? They are paying the tuition portion, and he is paying the R &B portion. Will admit I never looked close enough to see if the credits are for just tuition, and in that case I guess my question is moot. Plus, I do Turbo tax and just input where they tell me to input.
     
    Last edited: Jan 4, 2013
  9. kinnem

    kinnem Moderator

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    That might be tough as parents have to provide more than 50% of the dependents support. Unless they are sending vast sums for entertainment and clothing then I think using the scholarship for room and board here would become problematic. But as you say, they should sit down with their tax consultant as only he or she knows their whole financial picture.
     
  10. kinnem

    kinnem Moderator

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    The only tax advantages are for tuition, fees and books. Room and board, other than being taxable if a scholarship pays for it, yields no tax benefit if paid for out of pocket.
     
  11. Pima

    Pima Parent

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    kinnem,

    I agree, I was just illustrating that if he does not talk to his folks, they could actually pay more in taxes because he opted to take the R&B believing it was a pure 10K.

    On a best day, I can't see it being worth it because even at 25%, tax rate, it is still 25% in taxes they will pay. Which is way more than the 1K they would have paid if they used it for tuition.

    Yes, I know many of us do not pay our actual tax rate because of deductions, but still the majority of us don't pay less than 10% in taxes when it is all said and done.

    In the OP's case that is what would be needed to make it a fiscally sound decision. Even if they pay only 7% in the end, the problem still comes back to what if the 10K takes them over to an 11% bracket?

    If I am correct the OP went this route because he didn't get a scholarship to his number 1 choice, and it was a financial decision. If that is the case, than this is a factor.

    If I am correct it is 11.7K for tuition and 8900 for R &B. (Our DS's gf goes there so the cost was a topic over the holiday dinner). The thing is for him, if it is like AFROTC, he would only get 8900, and that would be taxable. Whereas, if he still owed 1700, that 10K was not taxable at all, and he used all 10K.

    Do the math. Total bill is 20,600 IS
    - 10K for tuition (ROTC)
    10,600 owed

    -8900 for R &B
    11,600 owed
    Taxes owed on the 10K=????
    ~~~ Caveat: AFROTC pays directly to the bursar, thus they will only pay the 8900, not the 10K.

    In the end it isn't wise financially. Again, I am assuming he is at ECU, and using their figures.
     
  12. sjbd94

    sjbd94 Member

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    wow guys i really appreciate all this info, people at my battalion didnt even mention this to me and just asked me if i wanted to use my money for tuition or room and board. I was just thinking room and board is more so why not. So just to clarify money I would get for room and board goes into my parents income and could increase their taxes? So even though the money is still payed from Cadet command to the school it counts as income? I know you guys arent accounts but if I dont have any other sources of income and just have ROTC money coming in would it be a large amount I would have to pay? Because my room and board is 4000-5000 depending on the housing I get next semester while my tuition is only 3000. Like i said before I really appreciate the information guys!
     
  13. kinnem

    kinnem Moderator

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    @Pima - I'm in complete agreement.
    @sjbd94 - Not much is a relative expression. You really need to go over this with your folks, in particular the one who handles (in whatever way shape or form) the tax returns. We don't have the necessary info to advise you on your tax situation. There are way too many variables to really give you sound advise on that score. However, yes, the room and board money is counted as income, for tax purposes, regardless of how the actual money flows. After all, you're getting the benefit of it. However, if it is used toward tuition then it is not counted as income (go figure... yes, i mean it... go figure the tax consequences).
     
  14. sjbd94

    sjbd94 Member

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    alright probably sounds like a good idea, should I just let my dad know that the money I get for room and board counts as taxable income for myself?
     
  15. kinnem

    kinnem Moderator

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    Yes. it counts as your taxable income.... which return it goes on can be worked I think. It could definitely go on yours, and possibly could go on theirs, depending which route is more advantageous, although there could be restrictions which forces it to go on theirs. Again, lots of variables and depends on whether they claim (or continue to claim) you as a dependent. It might also affect whether they can claim you as a dependent (not so sure about this last as there are so many tax exceptions for full time students).

    Also, on the plus side of taking it as room and board... you can now still get tax credit consideration for the tuition.

    Lots of stuff to consider.
     
    Last edited: Jan 4, 2013
  16. Pima

    Pima Parent

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    sjbd,

    I say this with kindness, do not just decide by yourself that this is what you decided without talking to them first!

    If you did this as my child without talking to us 1st, it would be the 1st, last and only time you did this. My kids know how much we make (ballpark), but they have no clue about how much we pay in taxes. You could take me from getting a check to paying a check with one fell swoop!

    Taxes are complicated, 1 wrong "yes" or "no" for a question changes everything. I might be wrong, but I believe the tax guidelines are now @16K pages long. If you have never reported taxes, IMPO, this is not something an 18 yo should tell a parent this is how we are going to do it when they have paid for decades.

    If it is considered work income, 10K and a pt job could mean he now has to pay hundreds in taxes next spring, and where will that money come from April 15th? If he is willing to pay it, fine, but if his folks have to pony up, than he needs to have the discussion now, otherwise they will believe he is correct and there is no financial burden. IRS isn't like Visa...there is no monthly installment, you owe it in total on April 15th.
     
    Last edited: Jan 4, 2013
  17. sjbd94

    sjbd94 Member

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    i just informed my dad and he says that if goes to my income even at 10k for the year vs 6000 for tuition the room and board would be the better choice. But he doesn't want it to get added to his income. If i file my taxes separately it shouldn't go on my parents taxes right? On a side note i just talked to my friend who is also contracting with me and he used his for room and board , since it is more at our school, and had no idea it was taxable, no one at my school even informed him of this. I am happy I came on here.
     
  18. clarksonarmy

    clarksonarmy Recruiting Operations Officer at Clarkson Army

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    Room and Board is your income, not your parents. Unless you made a lot of money last year I wouldn't worry too much about being in a different tax bracket. You are getting way more information than you need here. Talk to your fellow cadets at your school, find out which one's use R&B and see what their issues are. In the Golden Knight Battalion almost all of our SUNY Potsdam scholarship winners apply their scholarship towards room and board. They receive a check every Semester (the money doesn't go to the school), and they are expected to claim that as income on their taxes, and they are expected to pay their Room and Board bill. They are also responsible for paying their tuition and fees, but between stipend and whatever financial aid they receive that bill is usually a lot less than what the typical student is paying to attend school.
     
  19. Pima

    Pima Parent

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    Again, please tell me which IS you are at, I am moving there now! 13K a yr for everything is amazing. I was happy with 19.6K in VA!
    :shake::shake::shake::shake:

    Heck CC is 4K here on a good day!
     
  20. -Bull-

    -Bull- Member

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    You also need to see how much money you would get for room and board. They don't just send you a check based on how much you tell them you need. They calculate R&B based on the average cost of living in your area. Usually comes out more than tuition, but you need to check. And yes, the money goes straight to you, the school is not involved.
     

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